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Gross v. Sun Life Assurance Company of Canada

United States Court of Appeals, First Circuit

January 18, 2018

DIAHANN L. GROSS, Plaintiff, Appellee/Cross-Appellant,
SUN LIFE ASSURANCE COMPANY OF CANADA, Defendant, Appellant/Cross-Appellee.


          Joshua Bachrach, with whom Wilson, Elser, Moskowitz, Edelman & Dicker LLP was on brief, for appellant/cross-appellee.

          Jonathan M. Feigenbaum, with whom Michael D. Grabhorn, Andrew M. Grabhorn, and Grabhorn Law Office, PLLC were on brief, for appellee/cross-appellant.

          Before Thompson, Lipez, and Kayatta, Circuit Judges.

          LIPEZ, Circuit Judge.

         More than four years ago, we remanded this case with the instruction that appellant Sun Life Assurance Co. reconsider its rejection of Diahann Gross's claim for disability benefits based on chronic and severe pain. See Gross v. Sun Life Assurance Co. of Can. (Gross I), 734 F.3d 1, 4 (1st Cir. 2013). Although we found at that time that Gross's medical evidence supported a finding of total disability, we concluded that, "[a]s the record now stands, we are unable to resolve the debate between the parties on the significance of . . . surveillance evidence" obtained by Sun Life. Id. at 27. After additional administrative proceedings, the company again denied her claim and Gross again challenged the denial in federal court. On cross-motions for summary judgment, the district court ruled in Gross's favor, finding that Sun Life should have awarded Gross benefits because the surveillance record as developed does not undermine this court's prior assessment of the medical evidence.

         In this appellate sequel, Sun Life challenges the district court's view of the expanded administrative record. It argues that Gross failed to adduce medical evidence in the renewed proceedings to offset the contradictory surveillance -- and thus did not meet her burden to prove that she is totally disabled. Sun Life also claims the district court abused its discretion in failing to impose sanctions on one of Gross's attorneys. In a cross-appeal, Gross assigns error to the district court's calculations of prejudgment interest and attorney's fees.

         After careful review of the record and the law, we affirm the district court's rulings on the disability claim and sanctions. However, we vacate the prejudgment interest award and remand for consideration of the appropriate rate of interest. We affirm the district court's attorney's fee calculation in all but two respects, concluding that two components of the award must be increased.

         I. Background

         A. The First Appeal

         Until she was placed on disability leave in August 2006, at age 34, Gross worked as an optician and office manager at Pinnacle Eye Care LLC in Lexington, Kentucky. In our prior decision, we described in great detail the facts then in the administrative record concerning Gross's condition and medical evaluations. See id. at 17-21. Here, we begin with a summary description of the original record and briefly review that prior decision to remand. We then describe the new evidence obtained in the second round of administrative proceedings. We elaborate below on both sets of facts where pertinent to our analysis.

         1. The Original Medical Evidence

         Multiple medical professionals who examined Gross between 2005 and 2007 reported that she was experiencing a variety of debilitating symptoms, including "chronic pain, inability to sit or stand for extended periods of time, severely diminished functional capacity in her right arm, and inability to bend, kneel, or crouch." Gross v. Sun Life Assurance Co. of Can. (Gross Remand Op.), No. 09-11678-RWZ, slip op. at 2 (D. Mass. June 24, 2016). Gross's treating physician, Dr. Rita Egan, a rheumatologist, opined that Gross was incapable of performing even sedentary activity, and she concluded that Gross suffered from reflex sympathetic dystrophy ("RSD"), fibromyalgia, widespread pain, and chronic fatigue. Gross I, 734 F.3d at 17. In two reports completed in late 2006, Egan noted, with some variation between the statements, that Gross could not sit in one place for more than an hour to ninety minutes, drive for more than ninety minutes, use her right hand, or lift more than ten pounds. Id. at 17 & n.19.[1]

         Other practitioners echoed Egan's diagnoses, noting, inter alia, abnormalities in the appearance of, and the way Gross positioned, her right hand. See id. at 18, 21, 22.[2] A physical therapist who performed a functional capacity evaluation ("FCE") in early 2007 reported "a number of 'key limitations' in Gross's physical abilities, including lack of functional use of her right arm, poor standing balance, inability to perform sustained overhead activity, need for assistance or a handrail to negotiate stairs, and inability to crouch, kneel, squat or crawl." Id. at 18-19. The physical therapist, Chris Kaczmarek, suspected that she suffered from RSD or an equivalent condition known as complex regional pain syndrome ("CRPS"), or fibromyalgia. Id. at 18. The FCE concluded that Gross "does not present at a functional level that could maintain sustained work activity." Id. at 19.

         Significantly, Kaczmarek stated that Gross was cooperative and "willing to work to maximum abilities" when performing tasks for the FCE. Id. at 23. Additional evidence of Gross's good-faith in describing her symptoms and limitations came from her co-workers and employers, who submitted letters "describing her persistence in continuing to work despite obvious pain and compromised physical capacity." Id. Her boss observed that "[s]he wasn't going to give in until she absolutely had to, " id. at 23 n.29, and Pinnacle's owner, Paul Wedge, stated that "[w]e stopped her from working when we received her doctor orders that she was not fit to work, " id. at 23 (alteration in original).

          The medical evidence, however, did not uniformly support Gross's disability claim. All of her diagnostic tests were negative, and several doctors speculated that psychological factors might be contributing to the severity of her symptoms. Id. at 24. Despite recommendations from multiple physicians that she obtain counseling or behavioral treatment, she never did so. Id. Most puzzling was the evidence resulting from an investigator's surveillance of Gross on nine days between November 2006 and February 2007. On most of those days, the surveillance revealed little activity by Gross, including multiple days when she either did not leave the house or was out briefly in unremarkable circumstances. Our prior decision highlighted three exceptions:

[O]n November 9, 2006, shortly after dropping off a teenager believed to be her stepdaughter at school, Gross was observed driving for about an hour and a half to her mother's home, with a brief stop at a rest area along the way. Second, during the evening of January 11, 2007, Gross drove a short distance with her stepdaughter to a Kmart, where she was observed bending down toward lower-level shelves, extending her arms above her head to retrieve items, and kneeling to examine other items.[3] Third, on February 21, after receiving a phone call that her mother had been admitted to the hospital with chest pain, Gross drove to a gas station, pumped gas using her right hand, and then drove for two hours to the hospital, with a brief stop halfwayt hrough the trip. About two hours later, she left the hospital and drove home.

Id. at 19.

         In support of its original denial of benefits, Sun Life also had procured opinions from two medical consultants who conducted paper reviews of Gross's medical records. In the first records review, Dr. James Sarni noted that "the documentation does not strongly support a diagnosis of [RSD or CRPS]." Id. at 19 n.24. He suggested an evaluation by a neurologist, which Dr. Rukmaiah Bhupalam subsequently performed on February 22, 2007, the day after Gross had made the trip to the hospital. Although Bhupalam initially concluded that Gross was "totally disabled even for sedentary work on a part time basis, " he changed his assessment after viewing the surveillance videotapes. Id. at 20. He observed that "she can function quite well and probably will be able to return to her previous occupation, " although he also noted that "a re-evaluation might be beneficial." Id.

         After Bhupalam's examination, the second non-examining consultant, Dr. William Hall, reviewed Gross's medical records and concluded that "the surveillance videos undermined [her] subjective reports of pain and functional limitations." Id. A third consultant performed a paper review after Gross appealed the initial benefits denial. That physician, Dr. Alan Neuren, noted the inconsistencies between Gross's condition as reported by healthcare providers and her appearance under surveillance, and he stated that "'[t]he only reasonable conclusion' to be drawn 'is that she has deliberately embellished her symptoms to her providers for secondary gain.'" Id. at 21.

         2. The Remand Rationale and Directive

         Given the well documented history of pain and other symptoms recorded by the medical professionals who examined her, and the buttressing observations of her co-workers, we had "no difficulty" concluding that Gross had submitted adequate medical evidence to prove her entitlement to disability benefits. Id. at 22.[4] We pointed out that, even though many of Gross's complaints were not readily susceptible to objective confirmation, the record did contain some objective evidence, "as well as the recognition by Sun Life's own medical consultant, Dr. Hall, that Gross's 'musculoskeletal symptoms, as presented by her, are credible to treating and consulting physicians.'" Id.

         We were concerned, however, about the "significant incompatibilities between Gross's reports and her observed functional capacity" while under surveillance, particularly during the three episodes described above. Id. at 26. Yet, even faced with those contradictions, Dr. Bhupalam had suggested that a re-evaluation of Gross could be helpful that's-- "an observation we underst[ood] to suggest that the video surveillance, while damaging to Gross, did not necessarily undermine her claim." Id. We also noted that the record did not reveal whether Bhupalam or Neuren had been told that Gross's two-hour drive to a hospital in February 2007 was precipitated by news that her mother had suffered a medical emergency. Id. at 26-27. That seeming omission of context led us to question "whether Sun Life ha[d] made a bona fide effort to determine Gross's capabilities." Id. at 27. At the same time, we noted the absence of a statement from Gross's own doctor "refuting Sun Life's assertion in its original denial letter that the surveillance 'show[ed] a capacity for activity that far exceeds' the limitations she claims." Id. (alteration in original).[5]

         We thus concluded that, on the record then before us, we could not answer the "open question" necessary to resolve the parties' debate over Gross's entitlement to benefits: "the effect that the surveillance evidence, when viewed in context, may have on other evidence indicating disability." Id. at 27. Accordingly, we remanded the case "so that the parties can further address both the significance of the video evidence in assessing Gross's limitations and the veracity of her self-reported and observed symptoms, particularly concerning the condition of her right arm." Id. at 27-28.

         B. The Evidence Produced on Remand

         In the renewed administrative proceedings following remand, Gross and Sun Life each submitted additional opinions from two medical professionals, none of which were based on new examinations of Gross. Sun Life relied primarily on reviews of Gross's medical file by two neurologists, Drs. David Ross and Rajat Gupta. Ross provided a nine-page report summarizing Gross's medical history and concluding that "[t]he medical evidence does not support a functional impairment as of August 1, 2006" --Gross's claimed disability date. Ross stated that "[t]here is no medical explanation for the discrepancy between the reported limitations and those seen during surveillance, " and he opined that Gross's "observed activities are more consistent with her true functional status."

         Gupta similarly prepared a report reviewing Gross's medical history, beginning in March 2004, and responded in the negative to a question asking whether he detected "any physical condition(s) supported by the clinical evidence that are functionally impairing." Gupta questioned the diagnoses of CRPS or RSD, noting that the symptoms on which those assessments were based -- including the swelling, discoloration, and temperature of Gross's right arm and hand -- "are known to be occasionally self-induced by particularly savvy individuals." Gupta highlighted Gross's long-sleeved clothing seen in the videos, "which typically would be avoided by sufferers of CRPS due to the extreme amount of hypersensitivity typically present, " and he noted the "consensus among most of her providers that there is a psychological component to [her] presentation."

         In an addendum to his report, Gupta stated that Gross's mother's medical emergency "would not explain the apparent ease and fluidity of movement that the claimant nonchalantly and effortlessly display[ed]" with the use of her right arm and hand as she prepared to drive to the hospital in February 2007 --although he acknowledged that "[p]ressing circumstances may conceivably allow an individual to perform physical feats of strength and/or endurance that would otherwise be considered 'unachievable.'" On that issue, Sun Life also obtained a follow-up opinion from Dr. Neuren, who stated that "[i]t is not credible that going to visit her mother due to illness would result in resolution of her condition even on a temporary basis. . . . CRPS is not a part time condition."

         Gross's additional medical evidence consisted of two letters, one from a pain management specialist, Dr. James Murphy, and one from the physical therapist who had performed her functional capacity evaluation in 2007, Chris Kaczmarek. Having reviewed Gross's medical records and the surveillance evidence, Murphy concluded that nothing in the three noted surveillance reports and videotapes "would contradict or invalidate the restrictions and limitations placed upon Ms. Gross by her physicians." Murphy stated that the physical effects of CRPS and fibromyalgia "can vary from day to day -- even minute to minute, " and that the severity of symptoms "are dependent upon numerous factors, such as medication regimen, [6] response to interventions . . ., physical stress, systemic illness, and underlying precipitating condition(s)."

         Kaczmarek submitted a two-page letter reporting that he had reviewed Gross's records, the three identified surveillance reports and videos, and the FCE he had performed in 2007. He summarily concluded that Gross's activities in the videos were consistent with his prior findings that she could neither sit "at a frequency sufficient to engage in sedentary employment" nor "'exert up to 10 pounds of force' on an 'occasional' basis sufficient to engage in sedentary employment."[7]

          C. The District Court's Post-Remand Decision

         After briefly surveying the evidence described above, the district court observed that its task was to decide whether the surveillance evidence "casts doubt . . . sufficient to dislodge" the panel's conclusion that the medical evidence supported Gross's claim of total disability. Gross Remand Op. at 5. To undermine the disability assessment, the court stated, "would require the videos to show Gross performing activities that 'directly contradict' the self-reported limitations upon which her treating physicians have offered their diagnoses." Id. (quoting Gross I, 734 F.3d at 25). The court found no such contradiction, nor "sufficient evidence that Gross otherwise exaggerated her symptoms to hoodwink her treating physicians." Id.

         Among other factors, the court noted that only one professional who had both personally examined Gross and reviewed the surveillance records -- Bhupalam -- had disagreed with the diagnoses of disabling conditions. But the court discounted Bhupalam's view because he initially had agreed that Gross was unable to work, and his later contrary opinion -- after viewing the surveillance tapes -- was "tempered" by his recommendation that a follow-up evaluation be performed. Echoing our own sentiment, the court observed that "[t]his recommendation makes sense only if the surveillance records did not unequivocally contradict Bhupalam's initial opinion that Gross was totally disabled." Gross Remand Op. at 6; see also Gross I, 734 F.3d at 26. The district court therefore ordered Sun Life to pay Gross benefits based on a disability date of January 30, 2007.

         In a subsequent ruling, the district court determined that the applicable interest rate for Gross's recovery of benefits is the rate set by 28 U.S.C. § 1961.[8] Previously, the court had awarded Gross approximately $96, 000 in attorney's fees for work performed in connection with the proceedings leading up to, and including, the first appeal to this court. The fees determination followed this court's holding that Gross had achieved a sufficient degree of success on the merits in Gross I to qualify her for fees under ERISA. Gross v. Sun Life Assurance Co. of Can. (Gross II), 763 F.3d 73, 81 (1st Cir. 2014). Significantly, our decision in Gross I changed the standard of review for claims denials under policies requiring proof of disability "satisfactory" to the benefits decision-maker. See Gross II, 763 F.3d at 75-76; Gross I, 734 F.3d at 16. That ruling, which replaced the deferential arbitrary-and-capricious standard with de novo review, "strengthen[ed] the entitlement to benefits for employees covered by such policies." Gross II, 763 F.3d at 85.[9]

         Both parties have appealed from the district court's judgment. In its briefs to us, Sun Life contends that the record does not support the court's conclusion that Gross met her burden to show that she is totally disabled. The insurer also claims that the district court erred in failing to sanction one of Gross's attorneys for threatening to sue Bhupalam if he did not withdraw his revised opinion adverse to Gross. In her cross-appeal, Gross argues that the district court abused its discretion in choosing a prejudgment interest rate that does not fully compensate her for the wrongful denial of benefits. She also asserts that the court abused its discretion in setting the amount of attorney's fees for the pre-remand proceedings, which concluded with our decision in Gross II.

         II. Total Disability Finding

         A. Standard of Review

         Our decision in Gross I established that Sun Life's denial of benefits was subject to de novo review by the district court. See 734 F.3d at 16. We recently observed, however, that the proper standard of appellate review is debatable in a case such as this -- i.e., "in an ERISA benefit-denial case that is presented for decision exclusively on the record of proceedings before the plan administrator." Stephanie C. v. Blue Cross Blue Shield of Mass. HMO Blue, Inc., 852 F.3d 105, 111-12 (1st Cir. 2017). Noting that the district court's de novo review of the administrative record may involve "weigh[ing] the facts, resolv[ing] conflicts in the evidence, and draw[ing] reasonable inferences, " we acknowledged a plausible argument for applying the deferential clear-error standard on appeal to the extent the district court's decision "rests upon factual findings and inferences therefrom." Id.

         We need not reach that issue here, however. Not only do both parties assume that our review is de novo, but application of that standard -- more favorable to Sun Life -- nonetheless leads us to uphold the district court's judgment. We therefore review the administrative record de novo without affording deference to the district court's assessment of the record.

         B. Discussion

         1. Evaluating the Post-Remand Evidence

         Sun Life insists that the record as supplemented on remand reinforces its original determination that Gross did not prove that she is totally disabled. In sum, it contends that Gross "failed to produce any evidence related to the[] 'open questions'" that prompted our remand, namely, "the significance of the video evidence in assessing Gross's limitations and the veracity of her self-reported and observed symptoms." Gross I, 734 F.3d at 27-28. Accordingly, Sun Life asserts, its own "overwhelming evidence" that the surveillance undermines Gross's disability claim is unrefuted and, hence, Gross failed to sustain her burden of proof.

         We see the record differently. Sun Life both overstates the persuasive value of its own post-remand submissions and sidesteps the fact that we previously found Gross's medical evidence sufficient to prove her entitlement to benefits. See id. at 24-25 ("In sum, the sustained and progressive nature of Gross's complaints, their facial credibility to the medical practitioners who personally examined her, and the objective symptoms consistent with RSD . . . support a finding of disability."). In seeking further development of the record, our objective was to learn whether, in light of the surveillance, there was reason to discredit the medical evidence we found adequate to prove total disability. See id. at 27 (describing "the open question" for remand as "the effect that the surveillance evidence, when viewed in context, [has] on other evidence indicating disability"). That is, we found that Gross had met her burden to show her total disability, but we sought additional information to help us determine if the surveillance evidence put forth by Sun Life was sufficiently probative to undermine Gross's medical evidence. Regrettably, neither party took full advantage of the opportunity to reinforce its position. As we shall explain, Sun Life must bear the burden of that deficiency because -- as the district court held -- the insurer failed to show that the surveillance "casts doubt . . . sufficient to dislodge" our judgment that the medical record supports Gross's disability claim. Gross Remand Op. at 5.[10]

         For its part, Sun Life did not have Gross reevaluated and, instead, secured opinions based on reviews of her existing records and the surveillance. These reports primarily reiterated what we already knew: Gross engaged in some activities that were inconsistent with the most severe symptoms and limitations she described to her doctors during years of treatment for pain, as well as with the severity and persistence of pain typically associated with a diagnosis of CRPS or RSD. The central theme of the new evidence, as Ross put it, is that "[t]he medical evidence does not support a functional impairment, " and, accordingly, "[t]he claimant's observed activities are more consistent with her true functional status."

         Yet, "[t]he medical evidence" already was before us during Gross's first appeal, and we found adequate record support for her self-reported limitations to conclude, subject to further insight into the surveillance evidence, that Gross had shown an entitlement to benefits. Moreover, as noted above, Egan's reports in the fall of 2006 set the outside range of Gross's abilities as sitting in one place for two hours, driving for ninety minutes, standing or walking for an hour, and lifting ten pounds. Gross I, 734 F.3d at 17 & n.19. Even the "particularly troubling" activities surrounding the hospital visit in early 2007 were not far removed from those limits, id. at 26, and we observed in our prior decision that, "[i]n context, the extra driving, the hurried movements, the pumping of gas may have been at the far edge of what she could manage with the aid of medication in the face of a family crisis, " id. at 27.

         Indeed, Gross told Bhupalam that she can "function better" after changing her pain medication patch, id. at 20, [11] and a month before the hospital trip she reported using numerous other medications on a daily basis, see id. at 19. Given the inference we drew from Bhupalam's addendum that the surveillance activities were not decisively at odds with a finding of total disability, Sun Life needed to show that, to the contrary, the capabilities Gross demonstrated in the videos were incompatible with the medical record of disability.

         Ross and Gupta's assessments, however, failed to evaluate the three highlighted surveillance reports in the context of the entire surveillance investigation and the consistent perceptions of examining practitioners that her complaints of pain were genuine. In particular, Sun Life's experts did not explain the contrast between the more ambitious surveillance activities that we highlighted and Gross's numerous days of ...

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